Release Details

Halliburton Provides First Quarter 2016 Operational Update

HOUSTON--(BUSINESS WIRE)--Apr. 22, 2016--
Halliburton (NYSE: HAL) announced today that, due to the upcoming April
30, 2016, deadline in its merger agreement with Baker Hughes, the
conference call scheduled for Monday, April 25, 2016, to discuss the
first quarter 2016 financial results is postponed until Tuesday, May 3,
2016. As previously announced, Halliburton and Baker Hughes agreed to
extend the time period under the merger agreement to obtain regulatory
approvals to no later than April 30, 2016, after which the parties may
continue to seek relevant regulatory approvals or either of the parties
may terminate the merger agreement.

Total company revenue of $4.2 billion for the first quarter of 2016
represents a 17% decline sequentially, compared to a 21% decline in the
worldwide rig count. Disruptive market conditions persisted in the first
quarter, as U.S. rig counts reached a record low and the worldwide rig
count is at the lowest level since 1999.

“Life has changed in the energy industry, especially in North America,
and over the past several quarters we have taken the steps to adapt to
that fact,” said Dave Lesar, Chairman and CEO. “Operators globally are
under immense pressure, and many of our North America customers are
fighting to maintain some value for their shareholders. Our goal is to
work with those customers to get through these tough times.

“Our customers have taken defensive actions to solidify their finances
including significant reductions to headcount and capital spend. While
these were necessary actions, it clearly will result in production
declines in the back half of 2016. But even when operators feel better
about the markets, they will still face issues of balance sheet repair
and we believe they will be cautious in adding rigs back. As activity
levels recover, we believe there will be a structural shift to lowering
cost per barrel of oil equivalent, through more collaborative business
models with service providers, more aggressive application of our
industry-leading technologies, and less duplicative costs,” added Lesar.

North America

“In North America, the industry experienced another tough quarter with
the average U.S. rig count down 27% sequentially. By comparison, our
revenue was down 17%, outperforming our peer group, and our completions
activity was only down single digits sequentially, demonstrating our
clients’ continued flight to quality. What we are experiencing today is
far beyond headwinds; it is unsustainable. My definition of an
unsustainable market is one where all service companies are losing money
in North America, which is where we are now. However, our margins have
continued to show resilience despite the aggressive activity and pricing
declines we have seen since the peak, with decremental margins of only
22% for the quarter,” said Jeff Miller, President.

“From the peak in the fourth quarter of 2014, the U.S. rig count has
declined almost 80%, setting a new record low. By comparison, our North
America revenue is down 62% over the same period, again outperforming
our peers, and operating income has only now slipped to a quarterly loss
position. The second quarter average land rig count is already down more
than 20% sequentially, and setting new record lows every week.
Nevertheless, we believe we will see the landing point for the U.S. rig
count during the second quarter. Once we see stability in the rig count,
our cost cutting measures will start to catch up. Previous downturns
indicate that there is typically at least a one quarter lag after the
rig count flattens before we see our margins begin to improve.

“Our technology is squarely directed towards reducing cost per barrel of
oil equivalent and continued client uptake validates our approach. We
continue to work with the key customers that have the best acreage and
are willing to work with us in a collaborative way. In some cases today,
this may mean doing work at a loss, but our intention is to deepen our
collaborative relationship with these strategic customers through this
market, and when the recovery comes we believe these operators – and
therefore Halliburton – will be best-positioned for the upside.

International

“The international markets continue to hold up better than North
America, but they are certainly not immune to the macro challenges,”
continued Miller. “At current commodity prices, many of our customers’
international projects are not economical. We believe much work remains
to realize the value that can be achieved through collaboration. This
conversation takes many forms, including eliminating redundant
activities that do not add value, finding productive but not excessive
solutions, and improving well designs to help make more barrels.

“We are pleased with the tone of these recent discussions, as they play
to Halliburton’s strengths. Our ability to reduce cost helps us win and
retain work, and our service quality has continued to improve in the
face of a distracting market. We have improved our service quality by
36% over the last five years, as measured by reduction of down time, and
our safety metrics have improved consistently over the last few years.
When it comes to customers awarding work, price is always a factor, but
in any pricing environment, better service quality actually results in
the lowest cost solution. Although the pipeline of opportunities is
substantially smaller in this market, we continue to win our share of
new international work across the globe.”

Restructuring

“There is no doubt this is one of the most challenging markets the
industry has ever experienced, as we face a more than 30% decline in
global drilling and completion spend for the second straight year.
Further, we expect to see an additional 50% decline in North America
spend in 2016, following last year’s 40% decline. Given this outlook, we
took a rational, hard-nosed look at our business, from three
perspectives: what our customers are doing, what our competitors are
doing, and what we can do. Here’s what we concluded:

“Many customers are struggling to survive and maintain some value for
their investors. They are doing this by cutting their capital costs,
drilling their best acreage, pushing service pricing down, stretching
payment terms, and radically restructuring their balance sheets through
debt to equity conversions or dilutive equity deals.

“A large number of competitors, especially in North America, are
rebasing their cost structures downward, in many cases by converting
their debt to equity, and underinvesting in areas such as maintenance
and technology, while continuing to price service work at less than cost.

“At Halliburton, we revisited every cost from manufacturing to delivery
logistics to field operations. This included looking hard at capital
equipment needs, required headcount and service delivery infrastructure.

“It was easy to conclude after this assessment that the industry is
grossly overcapitalized, especially in North America. To reflect our
current estimate of market requirements, we took a $2.1 billion
after-tax restructuring charge in the first quarter related primarily to
asset write-offs and severance costs.

Capital Equipment

“There is excess service capacity across all of our product lines, with
the largest single component relating to our North America pressure
pumping business.

“Over the last four years we have been systematically converting our
pressure pumping fleet in North America to the Frac of the Future
design. Our Q10 system is operating more efficiently and better than
expected; even when compared to our prior generation of industry-leading
horsepower, the difference is dramatic. The reality of today’s market is
that operational reliability is the name of the game, as it leads to
lower cost per barrel. The Q10 system is the most reliable in the market
today, contributing greatly to the flight to quality by our customers.
While some of our older equipment is actually better than what our
competition has now, it is not better than the Q10 and there is simply
no need for it in this market. Therefore, we have impaired a large
portion of our older, non-Q10 pumping equipment.

“It is important to note that we did generate outstanding returns for
our shareholders over the lifespan of this equipment. Even after the
impairment we took this quarter, the average return on this equipment
was approximately 20 percent, which is significantly higher than our
cost of capital and we believe is best-in-class among our peer group.
Depending on the age and condition of this equipment, it has either been
permanently removed from the fleet, or it has been cold-stacked. When
market conditions improve, we have multiple levers we can pull,
including accelerating the manufacturing and deployment of additional
Q10 units.

Headcount

“Responding to the reality of the market, we force-fit our employee
headcount to available activity levels. This provides sustainable
structural savings without compromising our ability to add personnel to
serve the market when it recovers. This included consolidating
management roles across countries and centralizing support functions.
This resulted in a workforce reduction of more than 6,000 during the
first quarter. Since the downturn began in late 2014, we have reduced
our global headcount by approximately one-third.

Service Infrastructure

“By the end of the first quarter, we had closed, or are currently in the
process of closing, over one hundred different service points worldwide.
These closures ranged from elimination of underutilized stock points to
the consolidation of individual service centers.

“In addition, our view of the fundamental changes to the market has led
us to take action and reduce the infrastructure that had been maintained
in anticipation of the pending Baker Hughes acquisition. We are not
making any decisions that would permanently impair our logistical
infrastructure, or ability to flex back up, but we see no scenario in
the current market where we need this additional infrastructure. We have
demonstrated in the past that we have the ability to react quickly in a
recovery and expand the business while maintaining higher incremental
margins than our competitors.

“In summary, the actions during the first quarter were difficult
decisions, but were the right thing to do for the health of the
business, and to help mitigate the market reckoning facing our industry.
We believe these actions present an opportunity for us to slingshot out
of the recovery, with higher incremental margins than we have typically
seen in other cycles.

“We believe our focus on execution and technology geared to deliver the
lowest cost per barrel will allow our customers to make better wells and
allow Halliburton to outperform our peers. And we continue to believe
that the longer it takes the recovery to occur, the sharper it will be,
that North America will offer the greatest upside, and that Halliburton
will be positioned to outperform,” concluded Lesar.

Geographic Regions

North America

North America revenue in the first quarter of 2016 was $1.8 billion, a
17% decrease sequentially, relative to a 27% decline in average U.S. rig
count. We had an operating loss of $39 million. These declines were
driven by reduced activity throughout the United States land sector,
particularly pressure pumping services, along with a decrease in
completion tools sales in the Gulf of Mexico. Across the major North
America basins, we are seeing continued uptake of our AccessFracTM
system to help our customers maximize reservoir contact, including
starting a new program with a major customer in the Duvernay formation
in Canada.

International

International revenue in the first quarter of 2016 was $2.4 billion, an
18% decrease sequentially, driven primarily by decreased activity across
the majority of our product service lines, specifically pressure pumping
services, completion tools sales and drilling services. International
first quarter operating income was $310 million, which decreased $192
million, or 38%, sequentially, driven by lower completion tools and
software sales.

Latin America revenue in the first quarter of 2016 was $541 million, a
22% decrease sequentially, with operating income of $48 million, a 51%
decrease sequentially. These declines were a result of reduced activity
in Mexico, Brazil and Colombia. In addition, during the quarter we made
the decision to begin curtailing activity in Venezuela. From a product
line perspective, Baroid, Cementing and Landmark experienced the largest
sequential declines in both revenue and operating income. During the
quarter, we saw a continued expansion of unconventional technology into
Latin America, including the Illusion® Frac Plug and our FracInsight®
software in Argentina, as well as the first deployment of our
DecisionSpace® 3D Asset Management Center in Ecuador.

Europe/Africa/CIS revenue in the first quarter of 2016 was $778 million,
a 19% decline sequentially, with operating income of $57 million, a 54%
decrease sequentially. The decline for the quarter was primarily driven
by a sharp reduction of activity in the North Sea due to seasonal
weather-related activity declines, along with lower completion tools
sales and drilling activity in Angola and Nigeria. We saw increased
uptake of our customized chemistry solutions in the North Sea throughout
the first quarter, including our Baroid BaraECD® drilling fluid system
and both iCem® and WellLife® cementing software, which helped our
customer successfully pump a critical phase of their well.

Middle East/Asia revenue in the first quarter of 2016 was $1.1 billion,
a 15% decline sequentially, with operating income of $205 million, a 27%
decrease sequentially. This was primarily the result of significant
reductions in activity and pricing throughout the Asia Pacific markets.
Middle East operations declined modestly as a result of ongoing pricing
concessions. We continued to provide solutions to our customers in the
mature fields segments of Middle East/Asia. First, we deployed our
recently released SpectrumSM Diagnostic Services with
production logging for a major NOC customer. We also delivered WellLock®
resin solutions to multiple customers in the Middle East, remediating a
well and providing a secondary barrier where standard cement could not
reach.

Operating Segments

Completion and Production

Completion and Production (C&P) revenue in the first quarter of 2016 was
$2.3 billion, a decrease of $507 million, or 18%, from the fourth
quarter of 2015, due to a decline in activity and pricing in most of our
product services lines, particularly North America pressure pumping
services which drove the majority of the C&P revenue decline.
International revenue also declined as a result of reductions in
activity in all regions coupled with lower pricing in Angola, Australia,
and the North Sea.

C&P operating income in the first quarter was $30 million, which
decreased $114 million, or 79%, compared to the fourth quarter of 2015,
with decreased profitability across all regions as a result of global
activity and pricing reductions, primarily in North America pressure
pumping services.

Drilling and Evaluation

Drilling and Evaluation (D&E) revenue in the first quarter of 2016 was
$1.9 billion, a decrease of $377 million, or 17%, from the fourth
quarter of 2015. Reductions were seen across all product lines due to
the historically low rig count, lower pricing, and customer budget
constraints worldwide.

D&E first quarter operating income was $241 million, which decreased
$158 million, or 40%, compared to the fourth quarter of 2015, driven by
a decline in activity and pricing across all regions, particularly
drilling activity, logging activity and software sales in the United
States, Mexico and China.

Management Change

“Kelly Youngblood, Halliburton’s Vice President of Investor Relations,
has elected to take a CFO position at another company. I thank him for
his 27 years with Halliburton, and wish him well. We are pleased to
welcome Lance Loeffler to the role of Vice President, Investor
Relations, effective immediately. Lance has served as Halliburton’s Vice
President of Corporate Development since 2014,” said Lesar.

Selective Technology & Highlights

Halliburton’s Testing and Subsea business announced it had released
the DashTM 3 inch Subsea Safety System to provide
electrohydraulic control of Halliburton’s subsea safety tree.
Previously, control was provided through direct hydraulic pressure
from the surface, but the Dash system helps increase reliability and
provide more cost-efficient operations by applying the speed of
electrohydraulic actuation to core safety functions. The system fully
integrates with Halliburton’s RezConnectTM Well Testing
System. The design was recently deployed on a deepwater well in Latin
America in over 7,500 feet of water, where it demonstrated a six
second downhole safety shut-in followed by an eight second surface
shut-in and disconnect.

Halliburton's Production Solutions business announced it had
introduced SpectrumSM Real-Time Coiled Tubing Services that
help improve well intervention operations and production by
integrating coiled tubing with downhole measurement tools, fiber optic
sensing and telemetry. The new family of services consists of Spectrum
Diagnostic Services and Spectrum Intervention Services. Spectrum
Diagnostic Services uses fiber-optic distributed sensing to assess
reservoir performance and completions effectiveness by simultaneously
monitoring a time series of data, as opposed to taking single
snapshots in time. Applications for Spectrum Diagnostic Services
include determining stimulation cluster efficiency, fracture mapping,
production profiling, leak detection, and assessing wellbore
integrity. Spectrum Intervention Services uses fiber optics to provide
subsurface and downhole insight from a bottom-hole assembly. The
services have multiple applications in unconventional fields, deep
water and mature fields, including milling, wellbore cleanouts,
fishing, perforating, and stimulation.

Halliburton successfully installed China's first intelligent
completion in Bohai Bay. The completion provided four zones of
selective injection, which enabled the customer to get real-time
pressure and temperature data for the reservoir and optimize the
injection strategy accordingly. In the Bohai Bay mature fields,
pressure maintenance is critical, and up until now injection could not
be controlled and directed into the individual zones from the surface.
The cost for conventional intervention methods can be high and if one
zone has an issue, trying to troubleshoot the problem zone can be
difficult and can add to the cost. Intelligent wells now give the
operator “eyes and ears” to be able to detect issues in real time and
respond quickly if issues occur. Additionally, it is possible to
provide pinpoint water injection to the best zones to ensure the
optimization strategy for the customer is met — all with zero
intervention.

Halliburton recently performed a customized, multistage fracturing and
fines migration control solution on an IGAPO well in Ecuador. The
procedure resulted in recovery of more than 450 barrels of oil per
day, completed in only 70% of the usual time required for conventional
fracture jobs. Halliburton designed and executed an unconventional,
multistage SurgiFrac® service that combined the ceramic proppant
coated with the SandWedge® conductivity enhancement system for three
fracturing stages. Included in the design of the solution was the
CW-FracSM service for the first stage, which was producing
at an estimated 60 percent water cut. The treatment was effective and
three fractures were completed with no operational issues. It was the
first multistage fracturing service, the first application of Pinpoint
and conductivity endurance treatments, and the first well completion
of this complexity in Ecuador.

About Halliburton

Founded in 1919, Halliburton is one of the world's largest providers of
products and services to the energy industry. With over 55,000
employees, representing 140 nationalities and operations in
approximately 70 countries, the company serves the upstream oil and gas
industry throughout the lifecycle of the reservoir - from locating
hydrocarbons and managing geological data, to drilling and formation
evaluation, well construction and completion, and optimizing production
through the life of the field. Visit the company’s website at www.halliburton.com.
Connect with Halliburton on Facebook, Twitter, LinkedIn, and
YouTube.

NOTE: The statements in this press release that are not historical
statements, including statements regarding future financial performance
and the pending Baker Hughes transaction, are forward-looking statements
within the meaning of the federal securities laws. These statements are
subject to numerous risks and uncertainties, many of which are beyond
the company's control, which could cause actual results to differ
materially from the results expressed or implied by the statements.
These risks and uncertainties include, but are not limited to: with
respect to the Baker Hughes acquisition, the timing to consummate the
proposed transaction; the outcome of any litigation involving the DOJ;
the terms, timing and completion of divestitures undertaken to obtain
required regulatory approvals; the conditions to closing of the proposed
transaction may not be satisfied or the closing of the proposed
transaction otherwise does not occur; the risk a regulatory approval
that may be required for the proposed transaction is not obtained or is
obtained subject to conditions that are not anticipated; the diversion
of management time on transaction-related issues; the ultimate timing,
outcome and results of integrating the operations of Halliburton and
Baker Hughes and the ultimate outcome of Halliburton’s operating
efficiencies applied to Baker Hughes’s products and services; the
effects of the business combination of Halliburton and Baker Hughes,
including the combined company’s future financial condition, results of
operations, strategy and plans; expected synergies and other benefits
from the proposed transaction and the ability of Halliburton to realize
such synergies and other benefits; with respect to the Macondo well
incident, final court approval of, and the satisfaction of the
conditions in, Halliburton'sSeptember 2014 settlement, including the
results of any appeals of rulings in the multi-district litigation;
indemnification and insurance matters; with respect to repurchases of
Halliburton common stock, the continuation or suspension of the
repurchase program, the amount, the timing and the trading prices of
Halliburton common stock, and the availability and alternative uses of
cash; changes in the demand for or price of oil and/or natural gas can
be significantly impacted by weakness in the worldwide economy;
consequences of audits and investigations by domestic and foreign
government agencies and legislative bodies and related publicity and
potential adverse proceedings by such agencies; protection of
intellectual property rights and against cyber attacks; compliance with
environmental laws; changes in government regulations and regulatory
requirements, particularly those related to offshore oil and natural gas
exploration, radioactive sources, explosives, chemicals, hydraulic
fracturing services, and climate-related initiatives; compliance with
laws related to income taxes and assumptions regarding the generation of
future taxable income; risks of international operations, including
risks relating to unsettled political conditions, war, the effects of
terrorism, foreign exchange rates and controls, international trade and
regulatory controls, and doing business with national oil companies;
weather-related issues, including the effects of hurricanes and tropical
storms; changes in capital spending by customers; delays or failures by
customers to make payments owed to us; execution of long-term,
fixed-price contracts; structural changes in the oil and natural gas
industry; maintaining a highly skilled workforce; availability and cost
of raw materials; and integration and success of acquired businesses and
operations of joint ventures. Halliburton's Form 10-K for the year ended
December 31, 2015, recent Current Reports on Form 8-K, and other
Securities and Exchange Commission filings discuss some of the important
risk factors identified that may affect Halliburton's business, results
of operations, and financial condition. Halliburton undertakes no
obligation to revise or update publicly any forward-looking statements
for any reason.

Additional Information

This communication does not constitute an offer to buy or sell or the
solicitation of an offer to buy or sell any securities or a solicitation
of any vote or approval. This communication relates to a proposed
business combination between Halliburton and Baker Hughes. In connection
with this proposed business combination, Halliburton has filed with the
Securities and Exchange Commission (the “SEC”) a registration statement
on Form S-4, including Amendments No. 1 and 2 thereto, and a definitive
joint proxy statement/prospectus of Halliburton and Baker Hughes and
other documents related to the proposed transaction. The registration
statement was declared effective by the SEC on February 17, 2015 and the
definitive proxy statement/prospectus has been mailed to stockholders of
Halliburton and Baker Hughes. INVESTORS AND SECURITY HOLDERS OF
HALLIBURTON AND BAKER HUGHES ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS, REGISTRATION STATEMENT AND OTHER DOCUMENTS FILED
OR THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. Investors
and security holders may obtain free copies of these documents and other
documents filed with the SEC by Halliburton and/or Baker Hughes through
the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by Halliburton are available
free of charge on Halliburton’s internet website at http://www.halliburton.com
or by contacting Halliburton’s Investor Relations Department by email at investors@Halliburton.com
or by phone at +1-281-871-2688. Copies of the documents filed with the
SEC by Baker Hughes are available free of charge on Baker Hughes’
internet website at http://www.bakerhughes.com
or by contacting Baker Hughes’ Investor Relations Department by email at alondra.oteyza@bakerhughes.com
or by phone at +1-713-439-8822.

Participants in Solicitation

Halliburton, Baker Hughes, their respective directors and certain of
their respective executive officers may be considered participants in
the solicitation of proxies in connection with the proposed transaction.
Information about the directors and executive officers of Halliburton is
set forth in its Annual Report on Form 10-K for the year ended December
31, 2015, which was filed with the SEC on February 5, 2016, and its
proxy statement for its 2016 annual meeting of stockholders, which was
filed with the SEC on April 5, 2016. Information about the directors and
executive officers of Baker Hughes is set forth in its Annual Report on
Form 10-K for the year ended December 31, 2015, which was filed with the
SEC on February 17, 2016, Amendment No. 1 to its Annual Report on Form
10-K for the year ended December 31, 2015, which was filed with the SEC
on February 19, 2016, and its proxy statement for its 2016 annual
meeting of stockholders, which was filed with the SEC on April 11, 2016.
These documents can be obtained free of charge from the sources
indicated above. Additional information regarding the participants in
the proxy solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, are contained in the proxy
statement/prospectus and other relevant materials filed with the SEC.

HALLIBURTON COMPANY

Revenue and Operating Income (Loss) Comparison

By Operating Segment and Geographic Region

(Millions of dollars)

(Unaudited)

Three Months Ended

March 31

December 31

Revenue

2016

2015

2015

By operating segment:

Completion and Production

$

2,324

$

4,246

$

2,831

Drilling and Evaluation

1,874

2,804

2,251

Total revenue

$

4,198

$

7,050

$

5,082

By geographic region:

North America

$

1,794

$

3,542

$

2,155

Latin America

541

949

694

Europe/Africa/CIS

778

1,097

962

Middle East/Asia

1,085

1,462

1,271

Total revenue

$

4,198

$

7,050

$

5,082

Operating Income (Loss)

By operating segment:

Completion and Production

$

30

$

462

$

144

Drilling and Evaluation

241

306

399

By geographic region:

North America

$

(39

)

$

279

$

41

Latin America

48

122

98

Europe/Africa/CIS

57

86

123

Middle East/Asia

205

281

281

Other items:

Corporate and other

$

(46

)

$

(69

)

$

(70

)

Conference Call Details

Halliburton will host a conference call on Tuesday, May 3, 2016, to
discuss the first quarter 2016 financial results. The call will begin at
8:00 AM Central Time (9:00 AM Eastern Time).

Please visit the website to listen to the call live via webcast.
Interested parties may also participate in the call by dialing (888)
793-5581 within North America or (973) 935-8723 outside North America. A
passcode is not required. Attendees should log in to the webcast or dial
in approximately 15 minutes prior to the call’s start time.

A replay of the conference call will be available on Halliburton’s
website for seven days following the call. Also, a replay may be
accessed by telephone at (888) 266-2081 within North America or (703)
925-2533 outside of North America, using the passcode 1670065.